Hindalco Stock Check: At its 52-week high today, is the metal stock a ‘buy’ at this juncture?

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The facility, to be commissioned by July 2025, will initially produce 25,000 tonnes of the aluminium foil which forms the backbone of lithium-ion and sodium-ion cells, Hindalco Industries said in a press release on December 12.

Stock Price Trend

The stock has marginally outperformed its benchmark index in 2023 YTD, gaining over 15 percent as against a 13 percent rise in Nifty Metal. It has given positive returns in 7 of the 12 months so far this year.

The stock has advanced over 3 percent in December so far after an over 12 percent jump in November, which is the highest so far this year. However, it shed the most, almost 15 percent, in February.

Meanwhile, in the last 1 year, the stock jumped almost 17 percent versus an 11.5 percent rise in Nifty Metal.

The stock hit its 52-week high of 545.95 in today’s session (December 14, 2023). It has now surged over 43 percent from its 52-week low of 381.00, hit on March 20, 2023.

In the long term, 3 years, the stock has given multibagger returns, more than doubling investor wealth. It has soared 119 percent in this period.

For the quarter that ended in September, Hindalco Industries, the flagship company of the Aditya Birla Group, reported consolidated profits of 2,196 crore, which was flat YoY. Overall revenue from operations was 54,169 crore, a 3.7 percent YoY drop, mostly attributable to a drop in copper prices around the globe.

Consolidated earnings before interest, tax, depreciation, and amortisation (EBITDA) increased by 6 percent YoY to 6,096 crore, with an EBITDA margin of 11.25 percent.

“We have maintained momentum driven by our focus on cost control and a solid performance by all our downstream segments. The copper business delivered its best-ever quarterly results backed by record metal sales. Aluminium India’s upstream EBITDA rose by 7 percent over the first quarter supported by higher volumes and lower input costs. Aluminium India downstream business EBITDA increased 16 percent sequentially due to higher volumes,” said Satish Pai, Managing Director, Hindalco Industries.

Is the stock a ‘buy’ at this juncture? Let’s take a look:

Fundamental Views

Prabhudas Lilladher: The brokerage has a positive view on the stock and raised its target price of 583 from 557 earlier, indicating an upside of 10.5 percent.

The brokerage believes Hindalco is best placed amongst the metals space as a) Novelis is expected to witness gradual improvement in per ton EBITDA over the next few quarters; b) opening up of captive coal mines will benefit India business post-FY26; and c) rising focus on high margin value-added products such as FRP expansion would drive volume growth from FY26.

Despite business headwinds, Novelis continues to perform well and invest significantly in growth. It has raised its FY24/25/26E EBITDA by 6%/1%/4% respectively on robust Novelis performance. At CMP, the stock is trading at attractive valuations, said the brokerage.

Motilal Oswal: The brokerage also has a bullish view of the stock with a target price of 580, implying an upside of 10 percent.

“Despite global macro uncertainties, a rebound in demand is anticipated across all the segments. This resurgence is expected to be driven by increased demand from EVs, consumer durables, industrial machinery, infrastructure, and the construction sector. Volume growth across geographies is expected to remain stable going ahead and all the capex across all the geographies is on track. We believe that Hindalco is well-placed to capitalize on the strong growth opportunity. We have raised our FY25E EBITDA/APAT by 5 percent/3 percent due to improved outlook,” explained the brokerage.

JM Financial: The brokerage has a ‘buy’ call on the stock with a target price of 600, implying an upside of over 11 percent.

JM Financial noted that the long-term outlook for Hindalco continues to remain buoyant given Novelis remains confident of achieving its medium-term EBITDA per tonne guidance of $525 and resilient performance by India aluminium operations. It also cited enhanced coal security post acquisition of Meenakshi, Meenakshi West, and Chakla coal mines and growth capex as reasons for being positive on the stock.

Hindalco, given 70 percent-plus steady/strong EBITDA being non-LME linked, remains its preferred play in the metal space, said the brokerage.

Nuvama: The brokerage has a ‘hold’ recommendation on the stock with a target price of 552.

It said that India’s aluminium business profitability hinges on aluminium prices, which are range-bound. The cost of production is likely to remain flat sequentially. Novelis earnings shall stay firm at $525 per tonne from Q4FY24 post a seasonally weak Q3, it forecasted.

Technical Views

Om Mehra, Technical Analyst, SAMCO Securities

Source: SAMCO

View Full Image

Source: SAMCO

HINDALCO holds a strong bullish trend, as evidenced by the continuous formation of higher highs and lower lows. Furthermore, the stock is holding above key moving averages, affirming the upward trajectory.

Currently, the Relative Strength Index (RSI) remains at 72 level, which indicates bullishness in the stock. The metal sector’s recent strength adds an additional layer of confirmation to the stock’s positive outlook. Analysing the weekly chart reveals a breakout from a couple and a pattern emphasising the stock’s robustness in its primary trend.

Indicators such as MACD also validate the stock’s bullish momentum and potential for continued upward movement.

Considering technical parameters, a long position can be initiated at CMP (Rs.532.8) with a target price of Rs. 570. SL can be kept at Rs. 507.

Gaurav Bissa, VP, InCred Equities

Hindalco has been in a consolidation phase for a while now. It was unfazed by the correction seen in the Nifty Metal index. However, it failed to participate when the metal index picked up momentum. The stock has recently witnessed an ascending triangle pattern breakout and has been holding above the breakout levels quite firmly. The RSI is trading around 68-69 levels on the daily charts and a sustained move above 70 is likely to give a strong thrust to the stock price. The stock can test 560 levels which once closed can push it toward 600 levels. Immediate supports are placed at 510 levels.

Sheersham Gupta, Director and Senior Technical Analyst at Rupeezy

500 was a big resistance for Hindalco and the stock has been trading below it since April 2022. The stock decisively crossed this level with good volumes the previous month, forming a cup and handle pattern and has been holding above it and breached a resistance of 510. The stock has been consistently making higher highs and higher lows. The daily RSI is at 69.85, indicating its bullish momentum with good upside potential. An upmove from here can push the stock to its next resistance level in the next 4-5 weeks. On the derivative front, huge writing was seen on the put side with significant open interest at the strike prices of 510, 520, and 530. Based on the technical analysis and Open interest, the stock can see a level of 565 in the short term. Longer-term investors can hold the stock with a target of 600. The stop loss can be placed at 500 on a closing basis.

Rajesh Palviya, SVP – Technical and Derivatives Research, Axis Securities

On a weekly basis, the stock has confirmed a “cup & handle” breakout at 510 levels on a closing basis, which signals bullish sentiments. The stock is also trending higher, forming a series of higher tops and bottoms, indicating a sustained uptrend. Currently, the stock is well placed above its 20, 50, 100, and 200-day SMAs, and these averages are also inching up along with rising prices, which reconfirms the uptrend. The short-term support zone is placed around 515-505 levels; hence, any short-term correction in the near future remains a buying opportunity for traders and investors. On the other hand, we expect this buying momentum may extend towards 560-590 levels. The daily, weekly and monthly strength indicator RSI is in bullish terrain, which signals sustained strength across all the time frames.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decision.

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Published: 14 Dec 2023, 02:37 PM IST

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